Beware of Fake CharitiesOne of IRS's Dirty Dozen

2/15/2017 - By John Mascaro, CPA

Move over “fake news” here comes “fake charities”.

So you have decided to dedicate a portion of your hard earned money to a worthwhile cause in the form of donation. You also know that in many cases, it’s nice to be able to get a tax deduction for that generosity, where possible.

But what if that charitable organization that came knocking on your door, or via the internet, or telephone call turns out to be a scam?

Ouch! There go your good intentions out the window …along with your tax deduction.

The Internal Revenue Service has compiled its annual list for 2017 of common tax scams that taxpayers may encounter anytime in what they are calling “the Dirty Dozen”. One such scam involves fake charitable organizations seeking your hard earned dollars by preying on your good intentions.

"Fake charities set up by scam artists to steal your money or personal information are a recurring problem," said IRS Commissioner John Koskinen. "Taxpayers should take the time to research organizations before giving their hard-earned money.”

Many of these schemes peak during tax return filing season as people prepare their returns or hire someone to prepare their taxes.

Perpetrators of such illegal scams can face significant penalties and interest and possible criminal prosecution. IRS Criminal Investigation works closely with the Department of Justice to shut down scams and prosecute the criminals behind them.

Find legitimate and qualified charities with the Select Check search tool on IRS.gov. (EINs are frequently called federal tax identification numbers, which is the same as an EIN).

Impersonation of Charitable Organizations

Another time when you may run into fake charities perpetrating abuse or fraud occurs in the wake of significant natural disasters.

We’ve all heard of those “fly-by-night” contractors who come into neighborhoods following major disasters, often taking down-payments on work they will never actually perform after they run back out of town with your money.

Well, similarly, it’s common for tax scam artists to impersonate charities to get money or private information from well-intentioned taxpayers.

To help disaster victims, the IRS encourages taxpayers only to donate to recognized charities. Disaster victims can call the IRS toll-free disaster assistance telephone number (866-562-5227). Phone assistors will answer questions about tax relief or disaster-related tax issues.

To learn about tactics used by scam artists and more, read the full article from the IRS here.

If you are worried you may have been a victim of a fake charity or want to take measures to protect yourself, email me or contact a member of our Tax team.